House prices drop again

After showing a modest increase in September, Standard Bank's median house price fell back by 2.5 percent year-on-year in October, it said on Monday.

The median house price in level terms was R580 000, the same as in August.

"After a period of mostly National Credit Act (NCA) induced volatility, Standard Bank's residential property index returned to normality during July and August which presented a clearer depiction of house price trends," the bank said.

The unexpected 3.6 percent increase in September was not seen as the onset of a new trend, but rather the result of volatile monthly data, Standard Bank added.

"It was anticipated at that time that the index would once again return to low or negative growth in the months to come. "The 2.5 percent decline in October is thus in line with our expectations."

Residential property would remain in the doldrums until such time that fundamental drivers of the market take a turn for the better — that may only happen in the second quarter next year, Standard Bank said.

"Even then, households may first want to normalise their personal finances before taking up new debt."

The reduced affordability of housing, exacerbated by higher mortgage rates, high food and fuel prices and a slowing economy, led to a decline in the demand for residential property and a substantial softening in house price growth.

Calculating a five month moving average (5m ma) to smooth out some of the volatility in prices indicated a growth rate of 3.1 percent in October.

Notwithstanding the generally unfavourable economic and financial environment, the 5m ma house price declined by less than 5 percent from its peak in July 2007, the Standard Bank added.


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